By the Division of Banks

You may choose from the following subjects:

Banks Credit Unions
Mortgages: Lenders & Brokers Small Loan Agencies
Collection Agencies Sales Finance & Insurance Premium Finance Agencies
Consumer Credit Cost Disclosure Foreign Transmittal Agencies
Miscellaneous

Banks

See also: Mortgages 96-007

96-012 Bank Stockholder Voting Requirements

The stockholder voting requirements set forth in Mass. Gen. Laws chapter 172 § 12 do not prohibit cumulative voting. Accordingly, it is the position of the Division of Banks that a state-chartered stock bank may use cumulative voting for the election of directors as long as the bank's Articles of Organization provide for cumulative voting.

96-013 Bank Authority to Sell Extended Service Contracts to Automobile Loan Customers

A state-chartered bank has express authority to make loans under Mass. Gen. Laws chapter 167E. State-chartered banks are granted further incidental powers under Mass. Gen. Laws chapters 168, 170 and 172, as well as other related statutory provisions. Thus, it is the position of the Division of Banks that a state-chartered bank may engage in the sale of extended service contracts to bank automobile loan customers as a power incidental to the bank's credit granting authority. However, if the vehicle service contract were determined to be an insurance product, the Division's position would be subject to change given certain statutory restrictions and limitations on state-chartered banks' authority to engage in the business of selling insurance products as well as the limited types of authorized insurance products which may be issued in connection with a loan. Accordingly, state-chartered banks cannot engage in the sale of vehicle service contracts in connection with making automobile loans until a determination of the classification the particular product has been issued by the Commonwealth's Division of Insurance and this Division has had an opportunity to review any such determination.

96-020 Foreign Bank Branch Office Establishment Requirements

Any bank chartered under the authority of a country other than the United States may establish a full service branch office in Massachusetts, where the bank will accept deposits and make loans, provided that the institution obtains from the Board of Bank Incorporation a certificate for the branch to transact business, under Mass. Gen. Laws chapter 167 § 38. If a foreign bank seeks to establish a representative office serving only as a liaison between the bank's customers in New England and its lending officers in New York, where no deposits will be accepted nor loans made, the foreign bank would not be conducting a banking business in Massachusetts and would thus not require approval under Mass. Gen. Laws chapter 167 § 38. Since a foreign bank would be authorized to maintain such a representative office in Massachusetts, the Division would not object to such office being conducted under the name of the foreign bank .

96-022 Student Loan Restrictions on Out-of-State Banks

Trust companies, savings banks, co-operative banks, savings and loan associations, credit unions, a national banking associations, federal savings banks and federal savings and loan associations shall not be subject to the provisions of the Small Loan Act, Mass. Gen. Laws chapter 140 §§ 96-114, under Mass. Gen. Laws chapter 140 § 114A, provided that such institutions do not take, receive, reserve or charge interest, for making a loan of $6,000 or less, in excess of those rates permitted by Mass. Gen. Laws chapter 140 § 100. Based on the provisions of Mass. Gen. Laws chapter 114A, it is the position of the Division of Banks that a bank chartered by another state would also not be required to obtain a license under the Small Loan Act. Loans written for $6,000 or less, however, are subject to the Small Loan Rate Order which establishes a maximum interest rate of 23% plus a $20.00 administrative fee. Compliance with other provisions governing the extension of credit to consumers in the Commonwealth such as Mass. Gen. Laws chapters 140D, 183 and 184 is also required.

96-033 Bank Acquisitions of Investment Companies

Banks may act as a financial or other agent for various entities and on such entities' behalf to negotiate loans and the sale, purchase or other disposition or acquisition of securities or other property, under Mass. Gen. Laws chapter 167F § 2(25). Banks may also act or assist customers in the preparation, maintenance and furnishing of payroll, records and statistical information, under Mass. Gen. Laws chapter 167F § 2(27). Neither of these provisions expressly authorizes a bank to perform investment management service functions. Thus, the appropriate statutory authority, for a bank's acquisition of an investment company providing such services, is the Leeway Law, Mass. Gen. Laws chapter 167F § 2(8). Under that statute, no filing with or specific approval by the Division of Banks would be required for such an acquisition.

96-038 Stock Option Plan Restrictions

The inclusion of non-employee directors in a savings bank's stock option plan is now authorized based on an amendment to Mass. Gen. Laws chapter 172 § 25 by Chapter 286 of the Acts of 1994.


Credit Unions

96-019 State-Chartered Credit Union Authority To Participate in "Agent or Sponsored" Credit Card Programs

"Agent" credit unions which approve or decline credit card applications to their own members, own the receivables for such credit card accounts and retain liability for any losses on such accounts, have the authority to extend such credit through credit cards, under Mass. Gen. Laws chapter 171 § 59A. Ancillary services, related to the credit cards issued by the "agent," and offered by a "principal/sponsor" credit union, are consistent with the activities in which a state-chartered credit union may engage in the implementation of issuing credit cards to its own members. Thus, a "principal/sponsor" providing such services would be in accordance with the general grant of power to state-chartered credit unions contained in Mass. Gen. Laws chapter 171 § 59. Therefore, credit unions may establish such credit card programs upon the following conditions: (1) any state-chartered credit union issuing credit cards to its members under approval received from the Division of Banks under Mass. Gen. Laws chapter 171 § 59A, shall amend that previously approved plan to reflect the services to be received from the other credit union and submit it to the Division for approval of the amendment; (2) any state-chartered credit union seeking to provide services relative to the credit card operations of another credit union shall amend its plan approved under Mass. Gen. Laws chapter 171 § 59A to reflect the services it may provide and submit it to the Division for approval of the amendment; and (3) any state-chartered credit union which has not previously received approval under Mass. Gen. Laws chapter 171 § 59A, shall include in any plan to be submitted under that statute, the information related to the program applicable to its issuance and/or servicing of credit cards.

96-028 Credit Union Applications

In reviewing credit union applications, the Division of Banks examines the financial and managerial resources of the applicant, the convenience and needs of the community to be served, competition among financial institutions, and the applicant's record of performance under the Massachusetts Community Reinvestment Act, set forth in Mass. Gen. Laws chapter 167 § 14. In the case that a credit union submits an application to amend its by-laws relative to membership under Mass. Gen. Laws chapter 171 § 10, the Division considers the reasons the specific amendment is being sought, the clarity of the terminology used in the amendment, existing relationships or contacts with individuals or entities to be included by the proposed change, the scope of the proposed change in the number of members as well as anticipated changes to the credit union's facilities, services, assets and expenses resulting from the implementation of the proposed amendment. Such an application would also trigger the regular notice process which requires local newspaper publication, lobby postings and an open public comment period. The application contains items designed to identify the impact on competition and the availability of services from other credit unions.

It is the Division's policy in matters affecting both credit unions and banks to ensure that a regulatory decision does not protect the market of a particular credit union or bank. Decisions that result in or promote increased competition are in the public good and should result in benefits to credit union members or the banking public in general.

The impact on competition is a public policy decision to be made by the Division of Banks. Accordingly, the Division does not look to or support a practice which would require the prior consent of a competing institution for a transaction or a matter relating to membership in a credit union. The Division has no requirement that the consent of either a state or federally chartered credit union be granted before a change in another credit union's membership by-law is approved or an individual or group membership is granted under existing by-laws.

96-040 Credit Union Credit Card Disclosure Requirements

The Official Staff Commentary on Federal Regulation Z provides at Section 226.9 that credit transactions subject to the Commonwealth's Truth-In-Lending Act, Mass. Gen. Laws chapter 140D, are exempt from chapters 2 and 4 of the federal act and further states that the exemption does not apply to transactions in which a federally chartered institution is a creditor.

Credit unions may implement a credit card plan authorized by the cardholder in a separately signed agreement under which the card issuer may periodically deduct all or part of the cardholder's credit card debt from a deposit amount held with the card issuer, under 209 CMR 32.13(d)(1). It is the position of the Division of Banks that the phrase "periodically deduct all or part" is to be read narrowly and specifically includes automatic payment plans whether secured or unsecured. Secured credit cards are contemplated by 209 CMR 32.12(d)(2) which in part allows for a card issuer to obtain or enforce a consensual security interest in funds of a cardholder held on deposit with such issuer.


Mortgages: Lenders & Brokers

See also: Collection Agencies 96-029

95-088 Mortgage Points Disclosure Requirements

Although disclosing an exact dollar amount of points to be charged may be difficult in certain mortgages, the Division of Banks views a mortgage loan which includes the financing of closing costs as an acceptable mortgage product. The disclosure of the number of points to be charged must be made to the borrower as part of the application process and in conjunction with the contents and timing of providing a Good Faith Estimate of Closing Costs and the Uniform Mortgage Loan Cost Worksheet pursuant to Mass. Gen. Laws chapter 184 § 17D and 209 CMR 38.00. The amount of points which may be collected by the lender at closing is limited to the amount which has been previously disclosed to the consumer under Mass. Gen. Laws chapter 183 § 63. Thus, in the event that points, origination fees, or similar fees are not previously disclosed to the borrower in writing prior to closing , the lender would not be allowed to collect any of the undisclosed points or fees. Nevertheless, a lender may comply with Mass. Gen. Laws chapter 184 § 17D and Mass. Gen. Laws chapter 183 § 63 by disclosing to the borrower in the Uniform Mortgage Loan Cost Worksheet the number of points to be charged in connection with the loan together with a statement that the dollar amount of points will change as the final principal amount of the loan is established, or a formula to explain how the dollar amount of points could change with the loan amount.

Although points or origination fees are included as part of the finance charge under Truth-In-Lending laws and regulations, Mass. Gen. Laws chapter 183 § 63 only governs the charging of fees or points for the purpose of defraying costs associated with origination and underwriting activities, or similar fees. Therefore, the statute does not apply to all finance charges but only those charged for the purpose of defraying the costs of originating and underwriting mortgage loans.

95-119 Mortgage Broker License Requirements

Entities which propose to take customer applications for a mortgage loan over the phone, respond to customer inquiries requesting loan product information, and make telephone calls to potential customers to determine their need and interest in obtaining a mortgage product fall within the definition of a "mortgage broker" and thus require a license pursuant to Mass. Gen. Laws chapter 255E.

95-198 Mortgage Servicer License Requirements

An entity which simply services existing mortgage loans on behalf of a licensed mortgage lender is not required to be licensed under Mass. Gen. Laws chapter 255E. If such an entity would be paid a fee for other than mortgage servicing functions, the licensing provisions of Mass. Gen. Laws chapter 255E could be triggered, particularly if such services involve contact with a consumer prior to the closing of the mortgage loan.

96-001 Bilingual Mortgage Loan Documents

No Massachusetts statute or regulation under the jurisdiction of the Division of Banks requires a lender who uses bilingual mortgage application forms to also use a similar bilingual format for the note, mortgage and other documents in the same transaction. Any advertisement in a language other than English, however, made by a bank or a creditor to aid, promote or assist directly or indirectly any credit account, must state in such other language what language the forms associated with the opening and maintenance of the account are in, under Mass. Gen. Laws chapter 167E § 1. In addition, unfair or deceptive acts or practices in the conduct of any trade or commerce are unlawful under Mass. Gen. Laws chapter 93A. The Office of the Attorney General, however, has jurisdiction over what constitutes such acts or practices.

96-002 Mortgage Lender License Requirements For Subsidiaries Which Are Not Wholly-Owned By National Banks

Subsidiaries must be majority owned to be included in the financial statements of a national bank, according to the instructions to the Report of Condition and Income which national banks are required to file with the O.C.C. Therefore, subsidiaries of a national bank, including indirect subsidiaries, must be majority owned to be exempt from the licensing requirements of Mass. Gen. Laws chapter 255E.

96-006 Loan Processing Service License Requirements

An entity performing loan processing functions as an independent contractor to financial institutions that receive mortgage applications, which is not involved in the underwriting functions relative to the loan, which has no contact with the consumer, and which earns a fee that is not conditioned on the mortgage being approved, does not fall within the definition of a "mortgage broker" set forth by Mass. Gen. Laws chapter 255E. Therefore, such an entity would not require a license under Mass. Gen. Laws chapter 255E.

96-007 Mortgage Loan Notice Requirements for Interest Rate Changes

All adjustable rate mortgage loans originated by state-chartered banks are governed by Administrative Bulletin 13-2C (Revised). This Administrative Bulletin establishes the standards and design for adjustable rate mortgages and also sets forth the timing, notice, and contents of certain disclosures required for any adjustable rate mortgage product. Section 3.04 of Administrative Bulletin 13-2C (Revised) states that the adjustment calculation to the interest rate shall be based on the most recently available index, at least 30 but not more than 60 days prior to the interest rate change date. A written notice in the form which complies with regulation 209 CMR 32.20(3) must be mailed to the borrower no less than 30 but no more than 60 days prior to the scheduled adjustment. This notification requirement must also be included in the Consumer Handbook on Adjustable Rate Mortgages provided to borrowers under 209 CMR 32.19. The language in the Consumer Handbook must also comply with the notice requirement contained in 209 CMR 32.20(3) relative to the contractual effects of the adjustment including the payment due after the adjustment.

96-008 Mortgage Broker License Exemption For A Limited Partnership Majority-Owned By A State-Chartered Bank's Subsidiary

A state-chartered bank or any subsidiary or affiliate of the bank is exempt from licensing requirements as a mortgage lender or broker, under Mass. Gen. Laws chapter 255E. When a wholly-owned subsidiary of a state-chartered bank is the general corporate partner in a limited partnership and owns more than 50% of the partnership, it is the Division's position that the limited partnership would be exempt from the applicable licensing requirements inasmuch as a wholly-owned subsidiary of the bank owns a majority interest in the partnership. Likewise, a corporate entity with 50% of more of its stock owned by a Massachusetts-chartered bank is exempt from the licensing requirements to act as a mortgage broker pursuant to Mass. Gen. Laws chapter 255E as long as the bank is the majority stockholder.

96-014 Mortgage Loan Application Notice

When processing a mortgage loan application on an owner-occupied 1-4 family property, a mortgagee must include a written statement to the applicant that such applicant has thirty days from the date of a letter of commitment or a letter of denial to request a copy of "any report" utilized by the mortgagee in connection with the application and containing an opinion as to the value of the property, under Mass. Gen. Laws chapter 184 § 17C. In the event that the applicant makes a written request for such a report, the mortgagee must provide the applicant a copy of the report, at no charge, within thirty days of the request. In a new program offered by Freddie Mac, called the "Loan Prospector", Freddie Mac issues a "Statement of Collateral Assessment" to determine an opinion of value of the real estate and not the more traditional Uniform Residential Appraisal Report. It is the position of the Division of Banks that providing a copy of the "Statement of Collateral Assessment" to a mortgage loan applicant would be in compliance with Mass. Gen . Laws chapter 184 § 17C. The language of this section does not limit the mortgagee to provide only a Uniform Residential Appraisal Report.

96-016 Mortgage Servicer Licensing Requirements

A mortgage servicer is not required to be licensed under Mass. Gen. Laws chapter 255E because such entities do not meet the definition of a mortgage lender or mortgage broker under the statute. In the event, however, that any mortgage payment being collected for a third party became more than 30 days overdue, such a payment would constitute a "debt" under Massachusetts law, and the mortgage servicer would require a collection agency license under Mass. Gen. Laws chapter 93 § 24.

96-018 Mortgage Lender Recordkeeping Requirements

A mortgage lender is required to retain for a period of three years after a mortgage loan is sold or final payment is made, whichever occurs first, copies of the note, settlement statement, truth-in-lending disclosures, correspondence, and papers or records relating to the loan, under Mass. Gen. Laws chapter 255E § 8 and its implementing regulation, 209 CMR 42.09. In particular, Mass. Gen. Laws chapter 255E § 8 requires mortgage lenders to keep and use within the Commonwealth "...such books, records, and accounts as will enable the Commissioner to determine whether such licensee is complying with the provisions of this chapter..." The statute also states that "preservation of such books, records, and accounts by photographic reproduction thereof or records in photographic form shall constitute compliance with the requirements of this section." It is the position of the Division that the words "photographic form" should be read in the context of an expanding technological capability and, although not specifically stated, optical imaging would be one aspect of a "photographic form." Therefore, records may be maintained on an imaging system and comply with the requirements of the statute and regulation. Licensees, however, should establish contingency planning and back-up storage procedures for imaging system documents which follow generally accepted practices for data processing and management information systems.

96-021 Notice Requirements Reflecting the Profit or Loss from Tax Escrow Fund Investment

All mortgagees holding a first mortgage on a 1-4 family, owner-occupied real estate that require advance payments for the payment of real estate taxes on the mortgaged property must pay interest on such deposits or advance payments at a rate to be determined by the mortgagee, under Mass. Gen. Laws chapter 183 § 61. All mortgagees required to pay interest on escrow funds must file an annual report with the Commissioner of Banks showing the rate of interest paid on the escrow accounts and including a statement showing the net profit or loss from the investment of such amounts including calculations of gross income and expense. Banks and credit unions which pay interest on escrow funds in an amount equal to the rate of interest paid on its regular savings or share accounts are the only entities specifically exempted from filing the statement of profit and loss with the annual report.

96-024 Balloon Payment and Reverse Annuity Mortgage Loans

Balloon payment mortgage loans are governed by Mass. Gen. Laws chapter 183 § 60. To be applicable to both bank and non-bank lenders, the restrictions set forth in the statute apply to the mortgage note itself.

Reverse mortgage loans secured by 1-4 family residential property in the Commonwealth are regulated by Mass. Gen. Laws chapter 183 § 67, and Mass. Gen. Laws chapter 167E § 2(B)(14A). Under Mass. Gen. Laws chapter 183 § 67, all mortgagees who seek to make reverse mortgage loans are required to write such loans according to the provisions established for banks in Mass. Gen. Laws chapter 167E § 2(B)(14A).

96-025 Mortgage Lender Trade Name Use

No authority exists under current Massachusetts law for a mortgage lender to conduct business under an existing license using a trade name for part of its business. The intent of the licensing framework set forth in Mass. Gen. Laws chapter 255E is to ensure that a consumer knows the identity of the entity with whom he or she is doing business. To allow a lender to use another name for a division within its business would be contrary to this intent and foster potential consumer confusion regarding the identity of the licensee. Accordingly, it continues to be the position of the Division that a licensed mortgage lender may not engage in making mortgage loans under a trade name while conducting other mortgage lending business under its corporate name.

96-027 Mortgage Servicing Fees

The Division of Banks does not sanction or authorize fees to be charged relating to the servicing of a mortgage loan. Such fees would require statutory or regulatory authority, or a basis in the contract between the mortgage servicer and the mortgagee or mortgagor.

96-031 Commercial Charge Card Licensure

Most of the sections in Mass. Gen. Laws chapter 255 refer to consumer transactions. The Division of Banks believes that the absence of a reference to consumer transactions in Mass. Gen. Laws chapter 255 § 12H reflects a clear intent on the part of the Legislature to extend the protection of Section 12H

to businesses. Likewise, collection agencies, foreign transmittal agencies, check cashers, and insurance premium finance agencies also must be licensed to conduct business even for commercial customers. In addition, no delinquency, late or similar charge may be assessed until ninety days after the balance first appeared in a monthly statement. An issuer cannot remove itself from the provisions of Section 12H by including provisions in its charge card agreement which would trigger credit terms.

96-041 Mortgage Loan Application Notice Requirements

A first mortgage lender is required to send written notice to any mortgage borrower whose application has been determined to be substantially complete, immediately upon the making of such determination, under Mass. Gen. Laws chapter 184 § 17D(e). A lender must mail or deliver to a mortgage borrower whose application is not substantially complete, no later than 21 business days from the date of application for a first mortgage loan, an oral or written statement of all verification information required to make a decision on said application including what items have been received but are not complete and what items have not been received, under Mass. Gen. Laws chapter 184 § 17D(d). A lender need not provide this statement if a decision has been made on the application and has been communicated to the mortgage borrower or if the lender has sent the notice requirement under Mass. Gen. Laws chapter 184 § 17D(e), indicating the application has been determined to be substantially complete. In summary, it is the position of the Division of Banks that a lender must inform a mortgage borrower of the status of his or her application no later than 21 business days from the date of application by either: approval or denial of the application, or notification that the application is not substantially complete pursuant to Mass. Gen. Laws chapter 184 § 17D(d), or notification that the application is substantially complete pursuant to Mass. Gen. Laws chapter 184 § 17D(e).

96-042 Second Mortgage Loan Restrictions

The interest rate on second mortgage loans made on property with an assessed value not exceeding $40,000, designated for six or less families, and owner-occupied in whole or in part, is limited to one and one-half percent per month, or eighteen percent per annum, on the unpaid balance, under Mass. Gen. Laws chapter 140 § 90A. After six months of continuing default on such a loan, the interest rate by law is reduced to twelve percent. A mortgage note is not invalid merely because the default interest rate is not included in the note. Upon the payment of any money by the borrower, the borrower shall be entitled to a receipt showing the date of the payment, the amount paid, and the amount applicable to principal and interest, under Mass. Gen. Laws chapter 140 § 90C. If the lender does not provide a receipt, he shall forfeit all interest on the principal sum. This section applies to individual payments made by the borrower and the interest forfeited means that the entire payment would be applied as principal to the debt.

96-043 Mortgage Broker License Requirements

A bank holding company's non-bank subsidiary which provides services related to an affiliated bank's lending activity and is compensated for providing such services by means of inter-affiliate credits would not be exempt from the mortgage broker license requirements of Mass. Gen. Laws chapter 255E. The Division of Banks has adopted a broad interpretation of what constitutes "compensation or gain" and would thus consider inter-affiliate credits as compensation or gain.

96-046 Mortgage Lender License Requirements for Exempt Entities Which Are Merging

Wholly-owned subsidiaries of national banks are exempt from the mortgage license requirements of Mass. Gen. Laws chapter 255E. If two such subsidiaries merge but continue to be wholly-owned by a national bank, the resulting entity will continue to be exempt from the mortgage lender license requirements of Mass. Gen. Laws chapter 255E.


Small Loan Agencies

96-032 Small Loan Agency License Requirements

Entities engaging directly or indirectly in the business of making, purchasing or originating loans of $6,000 or less where the interest rate of the sum loaned exceeds 12% per annum, must obtain a small loan agency license under Mass. Gen. Laws chapter 140 § 96. A licensed entity that has not made such loans for two years nor intends to acquire or in any way deal with such loans, but continues to hold outstanding loans would no longer be engaged in the business of a small loan agency. Therefore, such an entity would not be required to maintain its small loan agency license. During the time that any remaining loans have an outstanding balance, however, the Division of Banks, reserves the right to enforce the requirements of Mass. Gen. Laws chapter 140, and its implementing regulation, 209 CMR 12.00 et seq., applicable to the making of small loans. The Division must also be notified in writing of any change in address or corporate structure, other than the formation of a subsidiary, of such an entity.


Collection Agencies

See also: Mortgages 96-016

95-184 Collection Agency License Application Requirements

An applicant for a collection agency license must provide personal credit reports, net worth calculations and three years' financial statements, under Mass. Gen. Laws chapter 93 § 24B. The general purposes of the collection agency licensing statute and regulations are to ensure that a collection agency treats debtors fairly during the collection process, and to ensure that a collection agency remits all funds collected to its clients. The Division of Banks has determined that the requirements listed above apply to a corporate applicant's officers, directors, principal employees, and principal stockholders as a measure of the integrity, net worth, and general fitness of the applicant for a collection agency license. The requirements of an application regarding the disclosure of the ownership of a corporate applicant and financial statements of its officers, directors, principal employees and principal stockholders is relevant to the licensing process as measures of an applicant's financial responsibility, net worth, and general fitness to operate the business of a licensee.

95-194 Preventing Deceptive Acts and Practices

A collection agency violates 209 CMR 18.18(8) by reporting to a consumer reporting agency in the collection agency's name, unless the collection agency has obtained the express written authorization of the creditor.

96-195 Restrictions on Debt Collection

A collection agency may only collect or attempt to collect any amount including any interest, fee, charge or expense incidental to the principal obligation if the amount is expressly authorized in the agreement authorizing the debt and the collection agency has express written authorization from the creditor to collect any such amount, under 209 CMR 18.18(9). Therefore, a collection agency collecting or attempting to collect any fees not authorized by the agreement authorizing the debt would be engaging in a deceptive act or practice under the regulation.

Certain types of creditors may be subject to limitations on the charges for returned checks and other fees pursuant to certain specific statutes such asMass. Gen. Laws chapter 140 § 100, and Mass. Gen. Laws chapters 255B, 255C, and 255D. Such creditors are limited to a maximum charge of ten dollars. Additionally, the original agreement must authorize such a charge and it must be permissible for the creditor to add such charges to the existing obligation. As noted, the creditor must authorize the collection agency to collect such an additional charge.

96-029 Collection Agency Office Requirements

A collection agency engaged mainly or preponderantly in the collection of retail accounts against consumer debtors shall maintain an office in the Commonwealth under 209 CMR 18.05. Therefore, a mortgage loan servicer licensed as a collection agency as an incidental part of its business, to collect payments that are more than 30 days past due, need not maintain an office within the Commonwealth. Such a mortgage servicer, however, must make its records available for examination within the Commonwealth in a timely fashion at a mutually satisfactory site.

96-036 Collection Agency License Requirements

Entities not solely conducting the business of collecting debts are not exempt from the licensing requirements of Mass. Gen. Laws chapter 93 § 24. Only persons who act as an agent for a bank or national banking association whose usual business is not that of a collection agency are exempt from the licensing requirements of Mass. Gen. Laws chapter 93 § 24.


Sales Finance & Insurance Premium Finance Agencies

96-017 Sales Finance Company and Retail Installment Sales & Service Co. License Requirements

A motor vehicle sales finance company consists of any person engaged, in whole or in part, in the business of purchasing retail installment contracts from one or more retail sellers, under Mass. Gen. Laws chapter 255B § 1. Under Mass. Gen. Laws chapter 255D § 1, a sales finance company consists of any person other than an installment seller engaged, in whole or in part, in the business of purchasing retail installment sale agreements or revolving credit agreements of one or more retail sellers. Thus, it is the position of the Division of Banks that any entity which intends to buy retail installment paper in the secondary market and which will not be purchasing such contracts from retail sellers, would not be required to obtain a license under Mass. Gen. Laws chapter 255B, nor under Mass. Gen. Laws chapter 255D. Such an entity, however, would be classified as a "holder" under both Mass. Gen. Laws chapters 255B and 255D. Therefore, such an entity would be subject to certain sections of these chapters applicable to "holders" of installment contracts. ( See Mass. Gen. Laws chapters 255B §§ 11, 15, 17, 18, 19, 19A, 20 and 255D § 25 which subjects any "holder" to the provisions of chapter 255D.)

96-030 Sales Finance Company License Requirements

Any person other than an installment seller engaged, in whole or in part, in the business of purchasing retail installment sales agreements or revolving credit agreements of one or more retail sellers must obtain a sales finance company license under Mass. Gen. Laws chapter 255D. A retail installment agreement is an agreement signed by the buyer in Massachusetts involving a finance charge and providing for the sale of goods or the rendering of services or both. Also, entities engaged in the business of purchasing retail installment contracts, signed by buyers in Massachusetts, under which the title to or a lien upon a motor vehicle is retained by a retail seller from a buyer as security, in whole or in part, for the buyer's obligation, must obtain a sales finance company license under Mass. Gen. Laws chapter 255B.

96-034 Retail Lease License Requirements

An entity directly leasing certain consumer goods, without using a retail installment agreement as defined by Mass. Gen. Laws chapter 255D § 1, nor purchasing contracts from one or more retail sellers, would not be required to obtain a sales finance company license as the direct lessor under Mass. Gen. Laws chapter 255D. A lease may be considered a retail installment agreement if it (1) requires payments substantially equivalent to or in excess of the value of the goods involved; and (2) provides that the lessee will become or has the option to become the owner of the goods upon compliance with the contract for no other consideration, or nominal consideration. Thus, entities intending to engage in direct leasing using retail installment agreements require a sales finance company license, under Mass. Gen. Laws chapter 255D § 1.


Consumer Credit Cost Disclosure

See also: Mortgages 96-007

96-011 Truth-In-Lending Advertisement Requirements

Certain "triggering'" terms used in advertisements, require the following additional terms to be included in the advertisement under 209 CMR 32.24: (I) the amount of percentage of the down payment; (ii) the terms of repayment; and (iii) the "annual percentage rate", using that term, and, if the rate may be increased after consummation.

96-035 Truth-In-Lending Disclosure Requirements

A mortgage refinancing is a new transaction requiring new disclosures to the consumer, unless the refinancing merely reduces the annual percentage rate with a corresponding change in the payment schedule, under 209 CMR 32.20(1). However, a revision of terms which simply takes the form of an extension of the maturity date of the note with no reduction in the interest rate, would not require additional disclosure to the borrower because under 209 CMR 32.20, a refinancing occurs when an existing obligation is satisfied and a new obligation undertaken by the same consumer. Mass. Gen. Laws chapter 183 § 63A also states that a revision of terms pursuant to this section is not a rewritten or refinanced loan.


Foreign Transmittal Agencies

95-178 Foreign Transmittal Agency Branch Offices

Each branch of a foreign transmittal agency must have a separate license under 209 CMR 44.09(1), and must comply with all sections of Mass. Gen. Laws chapter 169 and 209 CMR 44.00 et seq. In addition, all receipts for deposits of money received for transmission to a foreign country must be on forms approved by the Commissioner of Banks, under Mass. Gen. Laws chapter 169 § 8. Such receipts must disclose the issuing entity's license type and number, under 209 CMR 44.10(3).


Miscellaneous

96-023 Executive List

Any person or organization may keep informed of all the activity conducted by the Division of Banks by being placed on the Executive List. Members of the Executive List receive a copy of the Division's Monthly Activity Report as well as other Division publications, such as this Digest. To be placed on the Executive List, send a check or money order for $30.00, or the pro rata amount for the remaining months of the calendar year, payable to the Division of Banks, ATTN: Business Unit.